British historian Niall Ferguson and German economist Moritz Schularick coined the term “Chimerica” over lunch in a Chinese restaurant in London one day in 2006. Their mashup of “China” and “America” caught on because it crystallized what everyone could see: Despite, or rather because of, their many differences, these two giant nations were locked in an economic embrace. China shipped tons of merchandise to the U.S., creating manufacturing jobs that lifted millions from poverty. The U.S. got cheap goods and paid for them with quintessentially American products such as passenger jets, movies, and U.S. Treasury bonds—essentially, borrowed money.
Now Chimerica is coming apart. The latest sign is the blowup over ZTE Corp., the Chinese telecommunications equipment manufacturer that violated the terms of a 2017 sanctions settlement, then lied about it. As punishment, the U.S. in April cut off ZTE’s access to critical U.S. components from companies such as Intel Corp. and Qualcomm Inc. for seven years. The virtual death sentence for ZTE infuriated Chinese leaders, potentially jeopardizing Beijing’s cooperation on a host of other Trump agenda items, including plans to negotiate a reduction in the U.S.-China trade deficit and to denuclearize the Korean Peninsula. In a Sunday morning tweet on May 13, President Trump said he and President Xi Jinping were working together to give ZTE “a way to get back into business, fast.” That came days before Xi’s top economic adviser, Liu He, was due to arrive in Washington for talks with Secretary of the Treasury Steven Mnuchin.
